Betrayed by his son-in-law - Family Business: Case Study - Column

Nation's Business, Jan, 1993 by Kay B. Wakefield, Marta Vago

David's small home-tool manufacturing business has been shaky since the start, but it has survived five years and now looks like it has a chance of success. His son-in-law and partner, Ken, has been making some good sales lately, and an infusion of capital from Joe, a new silent partner, is putting the business on a more solid footing.

Still, there's often not enough cash to pay David a salary. His wife, Angela, still works as an office manager to support them and the two teenage daughters who are still at home. The third and oldest daughter, Diane, who is Ken's wife and who is pregnant, works as a secretary to make ends meet. "I'm so happy you're finally going to be a grandfather," she has told David.

The majority shareholder, David has always overseen product development and manufacturing, leaving sales, finance, and administration to Ken. David hates handling money and paperwork. An experienced businessman, Joe has made himself available to offer advice and counsel. David, in turn, has invited Joe to visit the plant and has told him to feel free to look at files, records, and whatever he needs to become even more helpful.

One weekend, at Joe's insistence, David takes time to review the books himself. He begins to discover what Joe has already learned: that Ken is cheating on David and lying to him. Ken has often paid himself at times when he has told David there wasn't enough money for salaries. He has even deliberately failed to purchase badly needed supplies, jeopardizing the fulfillment of orders. David's heart sinks. "I trusted Ken!" he says to himself.

Furious and feeling betrayed, David's first impulse is to go over to Ken's house and heat him up. Only his concerns for his daughter, her marriage, and the impending grandchild stop him. What can David do in a mess like this?